Zogenix's (ZGNX) CEO Stephen Farr on Q1 2018 Results - Earnings Call Transcript

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About: Zogenix, Inc. (ZGNX)
by: SA Transcripts

Zogenix, Inc. (NASDAQ:ZGNX) Q1 2018 Earnings Conference Call May 9, 2018 4:30 PM ET

Executives

Brian Ritchie - MD, LifeSci Advisors

Stephen Farr - Co-Founder, CEO, President & Director

Michael Smith - EVP, CFO, Treasurer, Secretary & Principal Accounting Officer

Gail Farfel - EVP & Chief Development Officer

Analysts

Annabel Samimy - Stifel, Nicolaus & Company

Gerard Smith - Leerink Partners

Jason Butler - JMP Securities

Myles Minter - William Blair

David Sherman - LifeSci Advisors

Operator

Good day, and welcome to the Zogenix First Quarter 2018 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Brian Ritchie of LifeSci Advisors. Please go ahead.

Brian Ritchie

Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Dr. Stephen Farr; and Chief Financial Officer, Mike Smith. In addition, Dr. Gail Farfel, Zogenix's Chief Development Officer, will also be available during the Q&A session.

This afternoon, Zogenix issued a news release announcing financial results and providing a business update for the first quarter ended March 31, 2018. Please note that certain information discussed on the call today is covered under the safe harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Zogenix management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Zogenix's news releases and SEC filings, including in the annual report on Form 10-K and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, May 9, 2018. Zogenix undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Now, I'd like to turn the call over to Steve.

Stephen Farr

Thank you, Brian, and good afternoon to everyone who's joining us on today's call. I'm pleased to be speaking to you today as we advance towards multiple key catalysts for our late-stage lead program, ZX008 for the treatment of uncontrolled seizures in Dravet syndrome, including results from our second Phase III trial and planned regulatory submissions seeking approvals in the United States and in Europe.

As we previously noted, early in the first quarter, we enrolled and randomized the final patient in Study 1504, our second planned Phase III pivotal trial. This is a double-blind randomized two-arm trial designed to enroll approximately 40 patients per treatment group being conducted in the United States, Europe and Canada in Dravet patients who are on a stiripentol-based background treatment regimen of antiepileptic drugs. We are pleased to note that Study 1504 includes a total of 87 randomized patients in the efficacy cohort and the last patient is scheduled to complete the study at the end of May. Accordingly, we anticipate announcing top line results from the second Phase III study in Dravet syndrome at the end of June or in early July.

As you may recall, based on the positive results obtained in our first Phase III trial, Study 1, the FDA granted breakthrough therapy designation for ZX008 in Dravet syndrome in the first quarter. We recently conducted a type B meeting with the FDA to discuss the clinical development program and planned NDA content for ZX008 in Dravet syndrome. The key outcomes from this face-to-face meeting were reaffirmation of Study 1 and Study 1504 as the clinical basis for the NDA submission. And concurrence with the FDA that the anticipated six-month and 12-month exposures to ZX008 in the Dravet program at the time of NDA submission are likely to be sufficient to support the filing. The timeline for a rolling NDA submission was also agreed upon. With this latest feedback from FDA and assuming a positive result in the 1504 trial. We are very excited to be on a clear path to completing the full NDA submission in the fourth quarter of this year.

In addition, we are on track to submit an MAA in Europe by year-end and have initiated the process of pre-submission meetings with several national authorities and the EMA.

Now let me turn to some additional updates regarding ZX008 in Dravet syndrome. At the recent American Academy of Neurology, or AAN, Annual Meeting held in Los Angeles, we were pleased to present additional data from Study 1, highlighted in two poster presentations. The first presentation demonstrated that ZX008 was highly effective in controlling convulsive seizures in patients who had previously failed stiripentol therapy. We were interested in understanding whether a history of prior treatment failure with stiripentol predicts treatment resistance to ZX008, given that Study 1504 specifically enrolls patients whose seizures are uncontrolled on the stiripentol regimen. A total of 58 patients in Study 1, that's around 50% of the total cohort, were defined as having previously failed stiripentol therapy prior to study entry for reasons primarily due to efficacy and/or tolerability. In this post-hoc analysis, patients taking ZX008 at 0.8 milligrams per kilogram per day achieved a 60.8% greater reduction in mean monthly convulsive seizures compared to placebo, at a p-value of 0.002.

Additionally, in the 0.8 group, 72.7% of patients achieved a 50% or greater reduction in mean monthly convulsive seizures from baseline, and 50% of patients achieved an equal or greater than 75% reduction compared with 12.6% and 6.3%, respectively, in the placebo group. The differences between active and placebo groups were statistically significant. Across these and other efficacy measures, the results from the subset analysis of patients who had previously failed stiripentol were comparable to the full Study 1 population.

Our second AAN poster presentation focused on the potential for ZX008 to help control or reduce all seizure types prevalent in Dravet syndrome, not just major convulsive seizures. In the full Study 1 population, the median percent reduction in total seizure frequency were 13.1% in the placebo group, 70.1% in the 0.8 group and 34.3% in the 0.2 group. Both active doses were significantly separated from placebo. In addition to the two poster presentations, Dr. Kelly Knupp of the Children's Hospital of Colorado, presented new encouraging preliminary quality-of-life and cognitive function data from Study 1. The data were presented at the meeting as part of a broader session entitled Neurology Year in Review: Emerging Therapies Plenary Session. As noted in Dr. Knupp's podium presentation, patients treated with ZX008 experienced significant improvement on select measures of quality of life and executive function compared to those on placebo. We are encouraged to see initial significant positive signals on some of the measures of physicality, cognition and quality of life in a short-term 14-week treatment study, reflecting real gains by these children with Dravet syndrome. Typically, improvements such as these would not be expected to reach significance until after a longer period of time. Please note, these data are now included within our current corporate presentation, which is posted on our website.

As a reminder, patients enrolled in our core Dravet syndrome clinical studies who are eligible to continue treatment with ZX008 may roll over into our open-label extension trial, Study 1503. We continue to see very robust participation in the open-label extension trial. As of the end of April, over 270 patients have entered the open-label extension trial, with approximately 90% of these patients remaining in the study today. Of note, more than 60% of these patients have now been in open-label treatment for at least six months and over 50 patients have exceeded one year. While cardiac safety monitoring continues for all patients in the open-label extension study via periodic echocardiography and formal review by a data safety monitoring committee, no cardiac safety concerns have arisen to date in the clinical study program and there have been no cases of valvulopathy or pulmonary hypertension in any patient.

I'd now like to provide you an update on our second target indication for ZX008, Lennox-Gastaut Syndrome or LGS, which has a patient population approximately 3 to 4x larger than the current population of patients with Dravet syndrome. Our ongoing Phase III multicenter global trial, Study 1601, is a double-blind placebo-controlled three-arm study to assess the safety, tolerability and efficacy of ZX008 in pediatric and adult patients up to age 35 with LGS when added to a patient's current antiepileptic therapy. The study is targeting a total of 225 randomized patients. As of the end of April, we had 16 sites in the United States and Canada open to recruit patients into Study 1601. We are continuing to open other sites in North America and to submit Ethics Committee submissions for approvals in several European countries. We have been pleased with the initial enrollment of patients for this global Phase III study in our second indication.

With that said, to reiterate what I said on our last call, 2018 will be a year of enrollment for Study 1601. As such, we do not anticipate top line data from this study before 2019. In summary, we are very pleased to have carried our strong momentum from 2017 over into the first quarter of this year. The FDA's breakthrough therapy designation granted to ZX008 in Dravet syndrome and our subsequent successful rotary interaction has placed us in a strong position to execute on our key remaining milestones in 2018. We are, first, looking forward to reporting top line data from our second Phase III study, Study 1504, shortly. Pending a successful outcome in Study 1504, we intend to file for regulatory approvals for ZX008 in Dravet syndrome in the U.S. and Europe in the fourth quarter of this year. With that, I will now turn the call over to Mike for his review of the financials. Mike?

Michael Smith

Thank you, Steve. I'll now review our financial results for the three months ending March 31, 2018, as compared to the corresponding period in 2017. Start with a reminder, due to the wind-down of Sumavel DosePro manufacturing operations in September of 2017, we currently are not involved in the production or sales of any commercial product at this time. And as such, the company recorded no revenue for the three months ending March 31, 2018. This compares with total revenue of $2.7 million in the first quarter ended March 31, 2017. Research and development expenses for the first quarter, ended March 31, 2018, totaled $23 million and that's up from $13.3 million in the first quarter, ended March 31, in the prior year, as we continue to enroll patients and expand the scope of our Phase III studies and programs for ZX0008 in both the U.S. and Europe in Dravet syndrome and LGS.

Selling, general and administration expenses for the first quarter ending March 31, 2018, totaled $8.1 million compared with $6.6 million in the first quarter ending March 31, 2017.

In this quarter, we reported a total net loss of the first quarter ending March 31, 2018, of $30.2 million or $0.87 per share compared with a total net loss of $21.3 million or $0.86 per share in the first quarter ended -- in the prior year. As of March 31, 2018, the company had cash and cash equivalents of $272 million. And this compares to a December 31, 2017 cash balance of $294 million.

As we end the first quarter of this year, we feel very good about -- to be in a strong operating and financial position as we head towards multiple key development and regulatory milestones over the remainder of the year. To date, ZX008 has demonstrated compelling efficacy data in Dravet syndrome, and we are very much looking forward to the availability of further Phase III top line data from Study 1504 very soon. We are also pleased to be seeing a nice pace of early improvement of patients in our second ZX008 Phase III program in LGS, which is an indication significantly larger than Dravet syndrome. With that, I'll now turn the call over to the operator to begin the Q&A session. Operator, would you please provide the instructions?

Question-and-Answer Session

Operator

[Operator Instructions]. First go to Annabel Samimy with Stifel.

Annabel Samimy

I want to ask you about the Study 1 data that was at AAN, the stiripentol refractory patients. So their variance was comparable -- I mean the variance in terms of the reduction in seizure was comparable to placebo as the overall population, but admittedly, it's a little bit higher, maybe not such a significance, but it is a little bit higher on the reduction as well as on the response rate. So can you surmise why that might be the case? Were they a little bit more severe or were they more responsive? Do you have any kind of theories as to why they might be getting a slightly better response? And -- or is it just random? And then the second question I have is, can you just remind us how a patient who might present with trace regurgitation or anything of that nature, how they would be addressed in real-world practice? And is -- are you implementing any kind of protocols in terms of allowing the physicians to modify their treatment in the open-label study as they would maybe in real-world practice. Can you just help us understand that aspect of the study?

Stephen Farr

Thanks, Annabel. Appreciate your questions. I'll take the first one and ask for Gail to address the question you had a fracture regurg. I think the numbers, although they look a little bit higher, I think, in reality. Because the [indiscernible] is a relatively small, particularly with regard to the subset, we should just regard these results as comparable. I don't think we can say, one, that it's more -- it's better than results in the overall Study 1 population. So I think comparable is the right word to use here.

Annabel Samimy

Okay, so is it fair to say there's absolutely zero effect on -- that stiripentol has zero effect on these patients in terms of their response?

Stephen Farr

I think we would agree with that, yes. In terms of their response. Yes.

Annabel Samimy

Okay. Great. And then the other question, please?

Gail Farfel

So, Annabelle, it's Gail. So to address the second part of your question about trace regurgitation. In clinical practice, if a physician or echocardiography were to identify trace regurgitation in a normal screening, no steps would be taken, there would be no medical follow-up. This is consistent with the American Society of Echocardiography guidelines as well as consistent with KLL advice and discussions with other cardiologists, pediatric and adult. In our trial, I remind you that it's a flexible dose trial, 1503, so within the range of 0.2 mg per kg per day and 0.8 mg per kg per day, physicians are able to titrate to optimal efficacy and safety or safety and tolerability. The maximum is reduced to 0.5 mg per kg per day for patients on stiripentol, as a reminder. With regard to managing patients in the trial who have been identified to have trace regurgitation on the mitral or aortic bell, we do have a tiered system of review.

The first review is a private company that monitors centrally all echoes conducted for the study. If there is a finding anything other than absent, that goes to a review for the independent Pediatric Cardiology Advisory Board. And then, if severe, it can go on to an adjudication by the independent Data and Safety Monitoring Board, which is a risk-benefit analysis. To date, no child in the study who has had a finding of anything other than absent has had the DSMB return a verdict other than continue in the study, no changes. So in other words, within the study as a whole, there has never been a cardiac result that has resulted in the Data and Safety Monitoring Board instructing that anyone change a dose or discontinue or take any action.

Operator

Next question comes from Gerard Smith with Leerink.

Gerard Smith

So my first question is, are there any specific requirements regarding the patient exposure in the open-label extension or the NDA filing by the end of the year? And if so, when would the necessary patient exposure or data accrue from this to be sufficient for the filing? And then the second is about commercialization outside of the U.S. Could you just talk a little bit about what sort of resources or investment you guys think is needed to target the number of pediatric neurology centers there? And what your strategy is?

Stephen Farr

Fancy questions. I'll ask Gail to address your first question, and I'll take the second one.

Gail Farfel

I'm sorry, I was listening to the second one. Could you repeat the first question?

Gerard Smith

The first question was about...

Gail Farfel

It was about the safety database. Yes.

Gerard Smith

If there was any specific requirement for FDA for the patient exposure in the open label.

Gail Farfel

Correct. Our discussions with FDA, they were very comfortable with the size of the safety database that we will have, so patients going through 1503, by the time of our planned submission in fourth quarter of the year. So no additional requirements or changes besides conducting at the program as it is ongoing or requested.

Stephen Farr

This is Steve, I'm going to jump back in to address your second question about ex-U.S. commercialization. I want to make the point that we do know there is an unmet need for this type of drug in Dravet syndrome in both Europe and other parts of the world. We do -- we are interested in exploring the opportunity to self-commercialize in Europe. We have a small team there. We are looking at the strategy with respect to Europe right now. And in addition, we are interested in looking for partnerships outside of Europe, in particular, at Asia Pacific. We are currently embarked upon a process to identify a partner for that particular region.

Operator

Next question comes from Jason Butler with JMP Securities.

Jason Butler

Just one follow-up on the AAN presentation. Can you just clarify how you view this cell population of stiripentol failures relative to the population you're enrolling in 1504? And I guess what I'm trying to get at is, are there any -- obviously, they are inadequately controlled in 1504 on stiripentol, but are there any partial responders or -- again, just how do the two populations compare and contrast?

Stephen Farr

Jason, really the only difference that we see is that in patients in Study 1 who were part of the subset analysis had already been identified as stiripentol nonresponders or failures. And they actually were drawn from that drug, either prior to our study or actually before our study in order to get into the trial. Whereas the patients in Study 1504 are still uncontrolled but they're currently taking the stiripentol regimen. So they haven't withdrawn from stiripentol therapy. But they're still in controls and they meet the inclusion criteria that we've put in place, which are really the same for both the trials. So we don't think there's any A-priority reason to suggest that the patient population in terms of seizure frequency, types of seizures will be any different in Study 1504 compared to what they were in Study 1. I'm not sure, Gail, if there's anything you'd like to add to that? Or does that address the question for you?

Gail Farfel

No. I think that's appropriate. The mechanism of action of stiripentol is primarily GABAergic, and that is a mechanism shared with other drugs. So this is further evidence for us to support that having stiripentol onboard in 1504 shouldn't be a factor in how patients who have ZX008 added are responding to our drug.

Jason Butler

Great. And then in terms of rolling NDA, can you maybe give some color about how quickly you can initiate the rolling NDA process after you get the results from 1504? And specifically, are there any gating items remaining in the CMC or the preclinical sections for the NDA?

Stephen Farr

No, we're in very good shape with respect to both the CMC sections and the nonclinical sections or the modules of the NDA. So they're certainly not on the critical path or any items on the critical path. Our NDA is gated by the availability of the clinical study report from 1504 as well as our efforts to integrate all the data into an appropriate form in the NDA. So really, clinical is on the critical path for the NDA submission, everything else should be ready before that time. In fact, it's our intent to submit the nonclinical section fairly shortly. And then to follow that up at some point during the summer -- late summer with CMC.

Jason Butler

And sorry. If I could just squeeze in one more. Do you plan on requesting a clinical pre-NDA meeting with FDA as well as the meeting you've already had?

Stephen Farr

Yes. We got great feedback from FDA around the NDA content. And also the clinical trials that we're currently conducting. But it would be very sensible for us to have that pre-NDA meeting as we prepare for the final NDA submission, yes.

Operator

Next question comes from Difei Yang with Mizuho Securities.

Unidentified Analyst

This is Alex on for Difei. Just on a quick clarification question on the Type B meeting with the FDA. When you talk about the ZX008 exposures, are we talking about a number of treated patient there or is there an element of safety, efficacy? Just if you could clarify that word for me.

Gail Farfel

So we are talking about the number of patients on ZX008 and the total time that they have been taking ZX008 during the program.

Unidentified Analyst

Okay. Great. And then just a quick follow-up, I wanted to just ask about some of the super responders in BS, those patients with 90%, 95% in seizure reductions. Can you share any insights, at that point, on maybe what differentiates these patients from some that have less -- lower response rates?

Gail Farfel

That's a very good question. We haven't yet discussed any factors that are driving response. We anticipate that we will be discussing those aspects of the treatment successes at a future medical meeting.

Operator

[Operator Instructions]. We next move to Tim Lugo with William Blair.

Myles Minter

Myles Minter on for Tim. My first one revolves around the 10% dropout rate in your long-term safety study. Can you provide more color as to the reasons for that? Was that just a loss to follow up or was it something a little bit more serious? And did you discuss that at your FDA breakthrough meeting? And then is the FDA happy with the frequency at which you're doing ECGs and getting the DSMB reviews? And then I've got a follow-up after that.

Stephen Farr

Myles, this is Steve. I want to make the point that an approximate 10% discontinuation rate is remarkably low in these open-label studies. So it's really of no concern there whatsoever. In fact, we are absolutely delighted with the fact that people are remaining on therapy, and we're building up a very strong safety database as a consequence of that. So really no issues there for us. Just to remind you, we have over 50 patients now who are -- have been on therapy for at least a year. In fact, some of the early entrants in our trial are almost closing in on their full second year in open-label extension. So really no concerns from our perspective with respect to discontinuations in open label. And your second question. Could you just remind me again of your second question?

Myles Minter

Yes. Just the frequency at which you're doing the ECGs and the data safety monitoring review boards. How many data points are we going to get out of that safety data?

Stephen Farr

Well, I can start. We are obviously doing fairly frequent echoes, both in the core trials and randomized control trials and then in open label. Specifically, in open label, we are monitoring echoes every three months. So if you look at our entire program now, we've conducted over 1,700 echoes in just under -- well, approximately 300 patients. So we're building up a very robust data set and we'll continue to do that as we progress towards the NDA submission.

Myles Minter

A beautiful. That sounds great. And if I can sneak in a last one. Just in your 1504 study, I understand patients are taking concurrent stiripentol even though they're not well controlled on it. How many patients you enrolled actually withdrawed from stiripentol altogether during the trial? Did you exclude them from the efficacy cohort? And is that why we see 87 patients instead of 130? Can you provide color on that?

Stephen Farr

I'll ask Gail to provide that color for you.

Gail Farfel

So as a reminder, 1504 has two treatment arms, placebo and active ZX008, with 40 patients planned per arm. So the total plan for that study was 80. And with a bit of a rush towards the end, we randomized 87. So we're not short of 120, we actually have exceeded our goal of 80 patients that were to be randomized by randomizing 87. Patients in the study were not permitted to discontinue stiripentol. That was part of the required background medication.

Operator

Next question comes from David Sherman with LifeSci Advisors.

David Sherman

Just one question from me. I was just wondering if there was any more color or detail on the planned drug interaction study with CBD, either in terms of design or timing? And then is the expectation that when that's ultimately done that, that would make it into the label?

Stephen Farr

Yes. Yes, we are in the midst of conducting a drug/drug interaction trial between CBD and ZX008. It's a very classical DDI trial design. So that will be ongoing. And as we look at it today, we expect that trial to be completed in readiness for the NDA submission. So it would be good to have the data there in our label. It's not essential, but it would be nice to have it in our original NDA.

Operator

And ladies and gentlemen, that does conclude our question-and-answer session. I'd like to turn the conference back over to Dr. Stephen Farr, President and CEO. Please go ahead, sir.

Stephen Farr

Well, thank you. Obviously, our late stage program continued to advance as planned and now in two indications, Dravet as well as LGS, and we still remain very excited about its potential. Pleased about the outcomes from our recent meeting with the FDA and now look forward to the availability of top line data from Study 1504 coming up shortly. And as we said on the call, following this, we intend to submit applications for approvals in the United States and Europe in the fourth quarter. We look forward to keeping everyone updated on our progress throughout 2018. And thanks, again, for joining us today. Enjoy the rest of your day.

Operator

Thank you, ladies and gentlemen. That does conclude today's conference. We thank you for your participation. You may now disconnect.